How Slow is the Recovery of Loans to Firms in Italy?

35 Pages Posted: 1 Aug 2019

Date Written: November 6, 2018

Abstract

This paper studies the characteristics of the recent evolution of loans to non-financial firms in Italy from an historical perspective, with the aim of ascertaining whether the ongoing recovery is creditless; the main demand- and supply-side determinants of credit are also discussed. We find the following results. First, bank loan dynamics have been weak compared to the universe of recoveries in 13 euro-area countries since 1980; however, credit has evolved in line with the median pattern in the restricted sample of recoveries following deep and long recessions and/or recessions associated with banking crises. Second, the reduction in loans has been common to firms of all sizes, though it has been more pronounced for smaller ones. Third, based on a review of credit market indicators, survey evidence and econometric studies, the weakness of lending to firms has been in line with subdued dynamics of demand; the stringency of lending criteria has also contributed, in particular for smaller and riskier firms.

Keywords: creditless recovery, credit demand, credit supply, small firms financing

JEL Classification: E32, E50, G20

Suggested Citation

Eramo, Ginette and Felici, Roberto and Finaldi Russo, Paolo and Signoretti, Federico Maria, How Slow is the Recovery of Loans to Firms in Italy? (November 6, 2018). Bank of Italy Occasional Paper No. 469, Available at SSRN: https://ssrn.com/abstract=3429852 or http://dx.doi.org/10.2139/ssrn.3429852

Ginette Eramo

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Roberto Felici (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

Paolo Finaldi Russo

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

Federico Maria Signoretti

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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